Business of Fintech
Not just dumb pipes: Fintech investment slows as banks try to gain back control
- Large financial firms looking to claw back some control over their clients by improving their back-end infrastructure and building their own digital solutions in-house
- Banks' efforts to overhaul their middle- and back-end systems and focus on the user interface is already apparent in mobile banking upgrades from Chase, Wells Fargo and Citi

Banks’ investment in fintech companies is slowing down as they refocus on improving core banking infrastructure, according to a report by CB Insights.
The Banks in Fintech report, released this week, found that banks have been foregoing big investments and partnerships over the past five quarters with a preference for building products in house — particularly in lending, payments and personal financial management. In both the U.S. and Europe banks spent more of their architecture investment dollars on capital markets software companies than blockchain startups.
KPMG's Pulse of Fintech report for the fourth quarter of 2017 noted that while deal activity among venture capital and private equity firms remained steady compared to 2016, the earliest stage of VC financing could see fewer deals and a volume decline in particular segments like online lending in the coming year. It's a sign of the industry's maturity; banks are showing their efforts to "fight fintech with fintech," Lindsay Davis, an intelligence analyst at CB Insights, said in a presentation.
The findings support the growing trend of large financial firms looking to claw back some control over their clients by building their own digital solutions in-house. In the robo space, for example, Wells Fargo launched Intuitive Investor, its digital-human hybrid offering from Wells Fargo Advisors, in November. In December, Morgan Stanley launched Access Investing and JPMorgan Chase launched JPMorgan Digital Investing. Goldman Sachs, Deutsche Bank, Raymond James, YF Financial and ICBC are all currently developing their own.
PFM apps have also been folding as banks work them into their own digital banking capabilities, realizing that budgeting should be a feature of banking rather than a separate experience. As banks overhaul the legacy infrastructure on which they’ll continue building their suite of financial services, pure-play consumer fintech companies will start to disappear, said Devon Watson, chief marketing officer of Diebold Nixdorf.
“We’ll see a complete end of pure plays for mass consumer audiences at mass scale,” Watson said. “The notion that the banks will just become the dumb pipes” consumer-facing fintechs can plug into “is fun to debate at industry conferences, but it’s ultimately alarmist and fairly unrealistic.”
That trend will continue and is already more obvious with large banks rolling out new mobile banking apps like Chase’s Finn, Wells Fargo’s Greenhouse and Citi’s upgraded mobile banking app soon to be available to all consumers including non-customers of Citi.
Diebold is banking on its customers’ need for help in the background. The nearly 160-year-old technology provider to the biggest banks and retailers released a product last month called AllConnect, which is designed to streamline banks’ and retailers back-end systems and takes all of the data and processes online, acting as the engine bolting physical and digital channels together and allowing banks to focus more on the front end experience. It would effectively provide the agility banks need but whose legacy rails hold them back from really achieving it.
“Banking clients now are not only focusing on customer experience but trying to overhaul themselves in the back- and middle-office systems,” said Amy Gennarini, a principal in the technology advisory services practice of EY. "A lot of institutions are doing top-to-bottom transformations to support digital customer journeys… The only way they’ll get instantaneous customer on boarding or loan extensions is through much better architecture. It’s not just about plugging in capability. It’s top-to-bottom customer experience.”

